Regulation Crowdfunding rules offer new opportunity
By Ashley Smith
Copyright © 2016, The Oklahoma Publishing Company
I am CEO of CrowdSeekr.com, an Oklahoma City-based company helping investors locate real estate crowdfunding investments. My partners and I are excited about the Regulation Crowdfunding (Reg CF) rules that took effect May 16. Reg CF gives ordinary investors the right, for the first time in over 80 years, to invest in private equity deals such as early stage companies and real estate projects. Reg CF shares a similar name with the donation-based crowdfunding made famous by the website Kickstarter.com, but is more accurately described as online private equity. Indeed, billions of dollars’ worth of capital have been raised online from affluent investors since the launch of EquityNet in 2005.
Reg CF has been criticized by some as being inappropriately risky. All investments carry risk, and like most other investments, investors in Reg CF deals can only lose what they invest. In fact, Reg CF allows for the possibility of far greater returns than stocks, bonds or other investment vehicles ordinary investors have traditionally been allowed access to, with a commensurate level of risk. Reg CF also provides investors with substantial protections. Investors are strictly limited in how much they may invest. Sponsors must provide significant disclosures regarding each investment.
Reg CF is admittedly new and its performance and practicability haven’t been tested. Nevertheless, it remains an exciting opportunity for investors who had previously been shut out of investing in high-growth private companies and real estate projects.
